The Insurance Regulatory and Development Authority is now ready to launch a host of reforms for unit-linked insurance plans (Ulips) to make the products more risk-based and reduce agents commissions.
?Hopefully, the Ordinance, effective April 9, will put an end to our turf war with the capital market regulator over Ulip regulations. The Ordinance will pave the way for a suitable legislation in the next six months,? said a top official of Irda.
As desired by the finance ministry, Irda would continue its drive to add more risk features in Ulip which had come under attack for being a more investment-linked and less risk-based product, he added.
? We will announce more measures shortly, adding risk features to Ulip. At the same time we want to make it more attractive than mutual funds, fixed deposits and National Savings Certificates (NSC) giving higher returns in the long term,?? said the official. He added that while the regulator had already asked life insurance companies to disclose the amount of commissions paid to agents, ?we would further reduce the commissions?.
Meanwhile, the insurance industry has heaved a sigh of relief following the end of the turf war and is raring to launch more products. According to Rajesh Sud, CEO & MD, Max New York Life Insurance, ?The controversy over the regulations seems to have settled. Now there will be a single regulator which is the most efficient model in Indian perspective. We will now file for new products.?
During 2009-10, the share of Ulips in life insurance business increased from 51% to 55%, according to Irda. Further, Ulips grew at a rate of 34% during 2009-10.
The growth for the overall life insurance business was 26%. In terms of first-year premium volume, there was an increase from Rs 44,332.40 crore to Rs 59,96.44 crore during the year.
Finance minister Pranab Mukherjee had said last week that the products needed further reforms on the back of the changes already announced by Irda.
The insurance regulator had earlier barred partial withdrawal from Ulips before five years and made life cover mandatory for all unit-linked pension products.
On agents commission, Irda chairman J Harinarayan had said, ?There has been concern over the commission paid to agents. But I am happy to say the ratio of commission to agency premium is a little over 7%. Considering the kind of sustained activity an agent has to undertake, the repeated visits that he has to make and the post-sale service he has to provide, the remuneration is not excessive.?